Investors in Australia like to invest their hard-earned money in something that gives a good return. For this reason, a large number of people in the country invest in shares and other investment while others have invested in securities exchanges. People in Australia prefer to invest in on-exchange investments.
Investment in property has also emerged as a popular investment. The ATO permits property owners to claim ATO property depreciation as a tax deduction. Property owners can claim depreciation if they earn income from their property. The deduction helps in declining property owners’ taxable income and consequently, they pay less tax.
Here are the types of income that investors must declare:
The interest that you earn from your bank accounts like term deposits is treated as an investment income. If you have earnings from other sources such as penalties from any of your investments, these should be declared. Also, if you get interest from your children’s saving account, you must declare it. It may include interest credited or paid by the government. Meanwhile, if you received bonuses from your life insurance, it will also be treated as an investment. You will be allowed a 30% tax offset out of such bonuses. You can hire experts to get your property valuation done effectively.
Shares can be described as yet another form of a dividend. When you declare your bonus shares and the company from which they came, you should provide a statement that will validate that these shares are a dividend. The company may be either a public trading trust, corporate unit trust, or listed investment business. There will be dividends with imputation credits in some scenarios and you must declare them on your tax return. It is worth mentioning that a share trader will be taxed differently from other investors. If you happen to be a share trader, you will be permitted to claim your losses as a tax deduction. For regular investors, the deductions shall be made on their capital gains. You should always hire an expert quantity surveyor to prepare your ATO tax depreciation schedule.
Managed investment trust
You must always specify any income generated from a trust investment product on your tax return. Some instances include money market, unit trust, cash management, and mortgage trust, among others. These kinds of trusts are considered investment income.
Many people struggle with this. Capital gains can be described as the difference between the amount you paid for a particular asset and the amount you sold it for. There will be some scenarios where you make a capital gain for a managed fund such as share trust, equity trust, or growth trust if it provides you a capital gain. Capital gains are usually included in your entire income and aren’t considered as an individual income, they will be taxed similarly.
Your return for all kinds of investments must be an integral part of your regular tax return. The process may be different depending on the kind of investments you have. If you have earned dividends, they will get added to your taxable income automatically. You can hire Deppro quantity surveyors to calculate your taxable income. You will also get a tax statement from your broker at the end of every financial year. The statement will include the total profits you have earned during that period. If you have filed your own tax return, make sure to include your entire profits in the report.
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A large number of first-time property investors find out that they will require a tax depreciation schedule sooner or later. They can obtain the tax depreciation schedule from Quantity Surveyor. Property investors can bring down their tax liability by effectively calculating depreciation tax deduction on rental property. ATO has already recognized Quantity Surveyors as the right individuals to calculate building costs for depreciation purposes. But not all Quantity Surveyors have expertise in depreciation. Depreciation experts possess the right skills to find out if your depreciation claim has been maximized or not.
Here are some interesting facts about QS that you must not overlook:
1. Passion for figures
An expert QS is passionate about numbers and prepares a depreciation schedule by making good use of these numbers. They will also evaluate the income-generating property and plant & equipment assets to assess their depreciable value. Meanwhile, the expenses of structural units like floors, walls roofs, and windows will remain eligible to be claimed as capital works deduction. The rate will be 2.5 percent every year over 40 years for any property where construction began after September 15, 1987. Calculating depreciation for plant & equipment is also not that easy. There are over 1600 depreciable plant & equipment assets identified by ATO. You can hire leading tax depreciation surveyors to assess all depreciable objects.
2. Include all plant & equipment asset
An expert QS has a great eye for detail and conducts a thorough survey of the property. They grab images of all the depreciable objects available inside and outside the building. A professional Quantity Surveyor always ensures to inspect all the objects and catalogue them so that all of them are specified on the owners’ depreciation schedule. They leave no stone unturned when it comes to calculating all the things that are depreciable. It will help in preparing effective tax depreciation reports.
3. Close relationship with accountants and property experts
They build strong relationships with Accountant and property professionals. The friendship among them remains mutual. They all work in the direction to make investment properties perform effectively for the owner. An expert QS assists investors by offering depreciation estimates to property managers and real estate agents for their listed properties. They also connect with property managers to organize an inspection period with tenants when it comes to completing the depreciation schedule.
The moment a QS concludes the depreciation schedule, a copy will be sent to you and your accountant. It will allow you to enter deductions into your annual income tax assessment. Accountants will be able to use your depreciation schedule to assist you to claim deductions consistently. You can also adjust any tax returns that were submitted in the last two years in case deductions were not claimed or maximized.
An expert QS will utilize tricks like instant write-off and less value pooling to let investors enhance their deduction. An expert QS will also be able to prepare a strata property act depreciation report without any hassle. They adhere to books and work closely with ATO to remain updated on the latest depreciation legislation and tax rules. They strive to follow ATO guidelines religiously to make sure that claims are valid.
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Working from home has become the new normal. The major advantage that it offers is the greater level of flexibility. However, there is one thing that has no flexibility: no matter where we work from, our tax obligations still remain the same. Did you know that you may be eligible for a depreciation tax benefit for your incurred costs during the COVID situation as well? Yes, you read it right! You can claim certain costs related to work from home obligations. However, it must be noted that this only concerns the people who usually work from an office but due to the COVID pandemic, or any other reason outside their control, are currently working from home. You should also remember that you cannot claim the amount reimbursed in this case.
Methods for Calculating Your Tax Deduction While Working From Home
Taxpayers were generally using two different methods before 1 March 2020 for calculating home office tax deduction, the Fixed Rate Method and Actual Cost Method. And these are still applicable.
But as a result of the COVID-19 pandemic, the Australian Taxation Office (ATO) introduced of the Shortcut Method, which applies to the periods:
1 March 2020 to 30 June 2020 for the income year 2019–20; and
1 July 2020 to 30 September 2020 for the income year 2020–21
According to the ATO, extension in the period is possible. However, this depends on the length of time the pandemic disrupts normal operations.
The ATO depreciation rate under the Shortcut Method is 80 cents per hour. This is for all “running expenses”. While using this method, you must record the corresponding working hours at home.
Methods for Calculating Your Tax Deduction While Working From Home
You should fully do the office work from home and not just the minimal task. The below are items that can be claimed in part as work from home expenses as listed below:
Occupancy expenses like mortgage interest, rent, and other costs.
Heating, cooling, and lighting – this includes various household utility bills.
Home office equipment- this includes computers, telephones, and printers.
Work-related phone calls – this includes phone rentals or mobile usage for office work purposes.
Depreciation in the value of furniture and fittings – you can claim for furniture such as desks and cupboards which are used for home office.
Is There a Need to Follow Any Tax Depreciation Schedule While Working From Home?
With the short cut method, it is not required. In other cases, an accountant can help in calculating the depreciation value. But if you are running a business from home, an expert can guide you in preparing the federal tax depreciation schedule.
What Are the Capital Gains Tax Implications When You Work From Home?
If you are working from home, you do not have any capital gains tax (CGT) implications for your home. This applies when you run a business from home.
Today more people are working from home however, facing certain expenses that weren’t in the picture during the regular times. You can follow the above procedures for achieving the depreciation tax benefits. Understanding tax claims is a challenging process but, the shortcut method gives you a simple calculating option. All you need to do is maintain the record of your working hours and expenses. If in any doubt, contact a tax expert for advice.
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You don’t have to be a real estate agent to work in the property sector. Some people don’t like the publicity that comes with it. But there’s other avenues into the industry where you can build and oversee development projects, calculate expenses, or help clients on the legal side of buying their first property.
Real estate agent
You’ve seen their smiling faces on billboards, public seats, and on ‘for sale/rent/to lease’ signs outside buildings. These guys are on the front lines of the property industry, selling real estate and putting it up on the market. But don’t think it’s an easy job with a large salary that lets you buy that nice car. Real estate agents do twice as much work behind the scenes. They write reports for clients and the properties they manage, book inspections, and work with a legal team to make sure ownership transfers go smoothly.
Surprisingly, though, you don’t need a bachelor’s degree to work as a real estate agent. The minimum requirement is a Certificate IV in Property Services. Before you start selling, though, a license is required.
A quantity surveyor is a person qualified to write a depreciation schedule. These guys will visit your property after you settle to assess the value of the plant and equipment items and capital works. The final report is sent 4 weeks after the visit.
Quantity surveyors also work on building projects. It’s their job to estimate the cost of the materials and provide a report to help with budgets. They’re also known as a construction cost manager. To become a quantity surveyor you must hold a university degree and register with the Australian Institute of Quantity Surveyors.
This job comes with lots of power and responsibility. As described by SEEK Learning:
As a Property Manager, you will organise and manage the letting of commercial, residential or retail properties on behalf of their owners. You’ll liaise with tenants and owners, organise inspections and maintenance, and follow up unpaid rent.
You don’t need a bachelor’s degree unless you want to move up to higher level roles, like real estate development. The minimum requirement is a certificate in sales and property management, as well as registering with a state body.
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Horror stories about the real estate industry are numerous, yes. But this is because some investors and newcomers weren’t aware of the risks and/or have a low tolerance for them. They probably didn’t listen to expert advice, either. We’ll bust some more of the common myths out there, and maybe then your mind will be slightly more at ease.
It’s best to wait until I’m ready
This is a thought based on fear. You will miss more opportunities the longer you wait. That office space or single family home you had your eye on will get snapped up as well.
Waiting is certainly advisable if the conditions for buying aren’t right e.g. it’s not affordable or you can’t get another loan. It’s important though, to be aware if you’re making a logical decision or holding yourself back. When in doubt, speak to your financial planner or a mentor who has more experience in real estate.
Finding a tenant is going to be easy
Tenants are some of the pickiest people on the planet, and rightfully so. They’re choosing their future home or workspace. You must meet their idea of what they want their living or working space to look like.
You can rely on your realtor to market your property correctly. You can’t rely on ‘open houses’ to bring you a tenant; people might be genuinely interested but most visitors are passing through, picking off what they don’t like before they come across the right fit.
Young people can’t afford it
Yes, more horror stories. But people in their 20s have just as much buying potential as other investors. It’s a matter of how prepared they are. Sensible investors, new or experienced, listen to expert advice from the people who help them buy the property and manage their portfolio. This includes the financial planner, conveyancer, accountant, mortgage broker, and the property manager. There are also incentives, like government packages, that help first home buyers with their purchase.
Young people are investors, too
Debt is the worst
Your credit card debt is an example of this. But not all debt is made equal. You will have some amount of debt after purchasing your first piece of real estate but the rental income will slowly fill up the savings account.
Equity is also a way to buy your next property. This is the purchase price of the property minus how much you owe. This is an example of good debt. You can use the equity balance towards another property purchase.
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After a severe bout of comparison-itis, you realize your investment isn’t performing as well as the others in the area. But you hesitate at the thought of shelling out more money for the sake of a new carpet. You should focus on improving your investment property if you ever want results like the ones below.
You’ll get a better yield
In Real Estate’s invest section, there are two columns; growth and yield. This is a sensible first place to check when you’re scoping out a suburb’s earning potential.
To get the yield of your investment property, make this calculation: (weekly rent) X 52 weeks / (property value) x 100. This is gross yield before you pay any expenses. Net yield is what you earn after the fact.
You probably have a low yield because the property is dated and sitting empty. It’s hard to generate income with both of those speedbumps giving you trouble.
Your tenants are going to be happy
Tenants are picky people and for a good reason. They’re choosing a place to live/work, hopefully for a long time. If your office block or residence is dated, it’s time to spruce the place up. Fresh coats of paint, carpeting, and amenities like a dishwasher and aircon are all little changes that make a big difference.
Need inspiration? Check this out; https://www.homestolove.com.au/belle
Making improvements like these in your investment property will increase your chances of finding a tenant if you don’t have one. If you’re finding it difficult despite making improvements, think about the rules. It’s difficult, for example, for pet owners to find a home that accommodates animals. Consider making changes in the conditions and you’ll attract appreciative prospects.
They think of it as home, so put the effort in!
It helps your depreciation report
Plant and equipment, aka easily removable features, like furniture, fixtures, and appliances cannot be claimed unless you installed them yourself. This means you miss out on lots of earning potential. After renovations on your investment property, call the quantity surveyor for another inspection.
The property can finally compete
Hamptons, modular, Scandi-style; there are so many home trends to keep on top of. But by at least renovating the house or office will be on par with the others on the market.
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Investing in property isn’t necessarily a hobby, though some see it way. Regardless of whether a person is in the sector to earn a little extra money or making a career out of it, there are things to love – and hate – about owning a portfolio.
Your homes and commercial blocks will always be there unless something extreme happens. Investing in property is often seen as a long-term, reliable investment, particularly when you have tenants.
Property investors have their ears to the ground, and emails in their inboxes, about the latest commercial and residential pickings up for sale. Quality within the building itself is a must; the structure being up to code, curb appeal and a recent update to the capital works are signs of a good investment.
The home itself is one part; the neighbourhood is the other. Tenants, whether they’re a family wanting to put down roots or a business looking to set up shop, will look at the neighbourhood dynamic before deciding to sign anything. Access to public transport, shops, and air conditioning are only a few of the items on their checklist.
Turns negative to positive
You won’t make money straight away, but delayed gratification is a given when you’re investing in property. Negative gearing is when you’re spending more money on your portfolio than there are returns.
When you keep working on it though, the negative gearing will turn into positive cash flow. This happens in a number of ways; lowering interest rates, raising the rent, changing property managers and reducing certain expenses.
Rentvesting = flexibility. You want to live in your dream suburb however, housing prices are on the expensive side. But you can still rent. You have flexibility instead of another mortgage but the luxury of living in a nice suburb.
People don’t want to make a career out of investing in property but they genuinely love the market and browsing homes. Instead of investing some people will buy homes, renovate them and sell for a profit.
No difference between work and play
Now, where there’s a good property, there’s going to be five investors wanting it. Bidding wars happen and people miss out. This is why it’s better to be a strategist, not a romantic who buys with their heart.
Property investors aren’t afraid to share stories about the horror tenants they’ve had over the years. Wild parties, drugs and extreme disrespect of the property e.g. cleanliness are some of the tamer complaints.
Problem tenants are easily weeded out by an experienced property manager. It saves the investors time and heartache (don’t be friends with your tenants).
That being said, however, for every good property manager there’s plenty of bad ones. What does a sketchy property manager look like? Well, they advertise their services in an unpaid ad on Gumtree for one. They also don’t keep a regular inspection schedule or return your calls for days. Good management firms are often recommended by other investors. They will keep you updated and return your calls as soon as they can. Plus, all levels of staff in the office look happy to be at their job.
Capital gains tax
Ah yes, you can’t make a profit without conditions attached. If you sell your property for a profit, then you must pay CGT. It’s unavoidable, but certain conditions and discounts are available to lessen the sting.
Not quite liquid
Investing in property isn’t easy money. You won’t sell it for a quick profit. Good homes can spend days to months on the market. So dress it up nicely and make it a place where people want to live.
No such thing as easy money in the property market
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It’s common for blank stares to follow this statement. Quantity surveyors don’t get as much of the limelight as accountants, engineers, or architects but their job is a crucial part of any investor’s world. Here’s 10 more things to know about them.
They’re well educated
There’s a lot of work that goes into becoming a quantity surveyor, starting with going to university. For example, there’s a Bachelor’s of Urban Development with Honours (Quantity Surveying and Cost Engineering) from QUT. This course involves majors like urban planning, accountancy, and applied economics. There’s more to working as a quantity surveying than just good maths.
They’re quite worldly
This job allows people to travel. The construction industry needs quantity surveyors far and wide, especially during the initial stages of a project. Those who work for a company with offices abroad will find themselves on worksites from Hong Kong to Dubai. A quantity surveyor working for Deppro visits both regional and capital cities all around Australia at scheduled times of the year. So they definitely rack up the frequent flier miles.
Perks of the job? Qantas Club access!
Part of the group
To legally work as a QS, you need to become a member of the Australian Institute of Quantity Surveyors. This group represents all surveyors across Australia. Members are bound by a code of conduct to operate at a high standard. They have access to further education, professional executive events, and other resources.
Another institute both individuals and companies must register with is the Australian Tax Practitioners Board. This is especially the case when the quantity surveyor is working on calculating property depreciation. This way the tax depreciation schedule is fully ATO compliant.
More money, less tax
A quantity surveyor is also known as a cost estimator. Their job is to save money on the build without compromising quality. They’ll complete their job before the developers break ground and consult through the project.
Those who work on calculating depreciation, though, start their work when the buyer settles the home. After a walkthrough of the property, taking photographs, making notes, and inspecting plans, the quantity surveyor writes up a depreciation schedule. This sets out the lifespan of the fixtures in the property and how much value they’ll lose over time.
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Being selective about what you invest in, whether it’s commercial or residential properties, is a blessing. You invest wisely and earn enough to make your next purchase. When you’re shopping around, you already know the type of tenant you want to target.
University and international students either live on-campus or in suburban properties close to their school. Residential properties like this need to be monitored closely so that nobody skips rent or causes damage. But in spite of the horror stories, the tenants are normally very well behaved.
You can rent out your properties as student accomodation
Student accommodation can take many forms. It can be a block of units, a single family home or even a townhouse. The home is ideal if it’s close to any given university or college campus and public transport.
These residential properties are often built by specialists and handled by a company with specialist experience (Aveo is an example). But on Real Estate, there’s some properties marketed as ‘retirement living’, geared towards investors.
Retirement homes are marketed to those who are over sixty but are by no means invalid. Residential properties on the market have high-end amenities and appliances included in the apartment or home. ‘Old’ doesn’t equal ‘dated’.
Mansion on the outside, retirement living inside
Retirees are good tenants because they respect their home and maintain it to the best of their ability. If they can’t, they’ll have a nurse or family member help them. If you’re looking at residential properties for retirees, it’s worth looking into these medical/nursing services and market them as optional amenities.
Single family homes
Small families will rent before they can afford their first home. Single family dwellings that are close to schools and shops are absolutely worth the investment and the fight that comes with trying to purchase one. Competition is fierce because other investors know there’s money to be made in this area of the market.
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You’re serious about getting into the investment game even though you don’t have a home in your own name. Fortunately, this isn’t an obstacle. Investing in property whilst renting at the same time, or ‘rentvesting’, made a splash early last year. It’s still going strong, despite getting less coverage in the headlines.
Why is rentvesting so popular?
There’s a number of things that make renting a more viable option among investors and people house-hunting in general.
Freedom: The word ‘mortgage’ scares the skin off lots of people and they can’t face the idea of juggling multiple home loans at once. It’s easier to sink their money and effort into their investment. Investors can give their full attention to the investment properties they own, like organising renovations, speaking with property managers, and organising depreciation inspections.
Postcode envy: So you can’t afford to own a home in that ‘happening’ and ‘ritzy’ suburb. But there’s enough in your budget to rent. You can rent where you want to live and then buy property in outlying suburbs. You can rent that fancy inner-city apartment but rent out a three-bedroom house to a family a few suburbs over.
Affording to live in the CBD area is enviable
Money: Investors who live in a rental home don’t have double the amount of taxes and duties that come with owning an investment property and their own home. And there’s plenty of benefits that come with renting out a property for investment purposes. Tax deductions cover real estate advertising, some legal costs, and general maintenance. The amount of money earned back in tax depreciation will increase the longer the investor owns a property.
As a rentvestor you have more financial freedom
Rentvesting is a way for first-time investors to get on that first rung of the property ladder. Prices are increasing on the market but living the rental life has eliminated this affordability problem for some. Those who rentvest get the freedom, the bragging rights, and the money back that other property owners miss out on.
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